Brent oil is now sitting comfortably above the $60, making its highest level in more than 2 years on the back of a deal between Russia and Saudi Arabia to extend production cuts past March next year.

Up until now, the deal to reduce output between Opec members has run smoothly with most countries sticking to their agreed output but come March, things could change and not all may be on board for an extension of cuts.

Countries such as Libya and Nigeria are looking like the countries that may opt out of the next deal as they feel they need to make up for lost time due to supply disruptions for various reasons

It will become clear to the market over the next month or so who is in or who is out and depending on how many countries refrain from extending production cuts, the oil price could be in for a sharp reversal.

Another thing to watch are drillers from the USA who are currently ramping up production to take advantage of higher prices and if history is anything to go by, this will eventually lead to an oversupply of oil in the market which will also pressure the price.

US shale producers claim they were still profitable when oil was around $40 a barrel so the margin for a pullback is quite significant

“We could rapidly go from a predicted deficit of around 260,000 barrels to a surplus of close to 1.5 million barrels. Prices would undoubtedly collapse,” said Matt Stanley, a fuel broker at Freight Investor Services.

The material published in on this page is produced by the FIBO group companies, and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC; furthermore it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

UNFORTUNATELY THE SERVICES OF THE COMPANY AREN'T PROVIDED TO RESIDENTS OF CANADA, USA, NORTH KOREA, IRAN, IRAQ, ISRAEL, AUSTRALIA, BELGIUM AND JAPAN

×

Risk warning: Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, your level of experience and preparation of taking risk. The possibility exists that you could sustain a loss of some or of all of your initial investments and therefore you should not risk more than you are prepared to lose. Please seek independent financial advice if necessary.

Important notice

By clicking "Continue" you will be redirected to the website operated by FIBO Group, LTD company registered in BVI and regulated by FSC. Please familiarize yourself with the Customer Agreement through the link. Click "Cancel" to remain on this page.